LONDON (Reuters) - Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) is to sell up to $3.3 billion (2.2 billion pounds) more shares in its U.S. bank Citizens (>> Citizens Financial Group Inc) to cut its stake to less than half and accelerate its retreat to its home UK market.

RBS said on Monday it will sell 115 million shares of Citizens' common stock and up to another 17.25 million shares in an over-allotment option, equivalent to 24 percent of Citizen's issued shares.

RBS sold a first slice of Citizens in an initial public offering in September, and said if all the shares are sold in the latest offer its stake will be reduced to 46.1 percent.

Citizens shares closed on Friday at $24.80 each, up 15 percent from their IPO sale price of $21.50 and valuing the U.S. bank at $13.5 billion.

Citizens, headquartered in Providence, Rhode Island, was bought by RBS in 1988 and expanded with 25 acquisitions, including the $10.5 billion purchase of Charter One in 2004.

RBS, 80 percent owned by the UK government after being rescued in 2008, is selling Citizens as part of a retreat to its core UK retail and commercial banking business, a process which has involved it slashing its balance sheet and quitting dozens of countries. It expects to complete the Citizens sale by the end of 2016.

RBS wrote down the value of Citizens by 4 billion pounds last month, because the business is not worth as much as it paid for it.

RBS is expected to reduce its Citizens stake to one-third or less this year, which means it could be deconsolidated from the group. That would boost RBS's core capital ratios by about 200 basis points, industry sources have said.

Morgan Stanley and Goldman Sachs are global coordinators and joint bookrunners and J.P. Morgan and Citigroup are also joint bookrunners.

(Editing by Sinead Cruise)

By Steve Slater